Bloomberg

So what: Pharmaceutical companies that acquire, rebrand, and reprice existing medications, such as Horizon Pharma, have been on the hot seat lately for practices that resemble price gouging. According to Express Scripts, the specialty pharmacy primarily dispensed drugs from Horizon Pharma US and did not meet certain contractual obligations.

Express Scripts Holding Co. says customers have many choices for getting medicine, and it takes action when pharmacies fall out of compliance with network agreements.

The move follows an announcement last month that Express Scripts and the two other largest US drug-benefit managers would terminate Philidor Rx Services, the mail-order pharmacy that's a partner of drugmaker Valeant Pharmaceuticals global Inc., from their networks.

Meanwhile, Horizon Pharma has issued a statement saying that Linden Care Pharmacy accounts for only 5% of its sales and that Express Scripts' wholly owned specialty pharmacy, Accredo Health, actually generates more sales for Horizon Pharma than Linden Care Pharmacy does. This competitive role, in our view, creates a clear conflict of interest, as Express Scripts stands as both a pharmacy's overseer and competitor.

Horizon also contends that Express Scripts is trying to squeeze out small pharmacies that compete with Accredo. Express Scripts questioned the nature of how the medications were being processed and ended its relationship with the network pharmacy. "The notion that Linden Care is a so-called "captive pharmacy" of Horizon Pharma is entirely false", Horizon said in a statement. It said all pharmacies that distribute its drugs are "fully independent", and Horizon doesn't own or have a stake in any pharmacy or an option to purchase any pharmacy. In addition, the relationship with these pharmacies is non-exclusive where each of these pharmacies may also fulfill prescriptions for other drug manufacturers. It also said the Express Scripts suit relates to a "previously disclosed dispute concerning a prior rebate agreement", and it said it terminated the agreement after "Express Scripts failed to live up to its contractual obligations". Express Scripts said it's seeking "to recover money rightfully due its clients". Horizon said that it is still reviewing the allegations in the complaint, but they are without merit and the company intends to defend itself. The area that we feel has been the company's primary weakness has been its disappointing return on equity.